After a record year for lateral moves in 2009, law firm partners looked around in 2010 and decided that there was no place like home. In the 12-month period ending September 30, 2010, only 2,014 partners left or joined Am Law 200 firms. That number was a hefty decrease—27 percent—from the same period a year earlier, when a whopping 2,775 partners moved. In fact, 2010 marked the lowest number of partner moves since 2000, when only 1,859 partners switched firms, and was well off the average of 2,458 partner moves each year from 2005 to 2009.

What accounts for the drop? For one thing, the 2009 numbers were artificially high because the market was flooded with partners from firms that went under, such as Heller Ehrman, Thacher Proffitt & Wood, Thelen, and WolfBlock. (Those four firms accounted for 15 percent of the 2009 moves.) Additionally, continued economic uncertainty in 2010 meant that some firms were reluctant to hire. “In general, firms have been much more opportunistic [about partner recruiting], and that’s due to the relative stabilization of the industry,” says Ari Katz, national director of legal recruiting at Bingham McCutchen.

Still, some firms defied this trend. DLA Piper could have installed turnstiles in its lobbies with all the turnover it experienced as it brought in 67 partners, more than any other Am Law 200 firm, and was also among the leaders in departures—42. U.S. managing partner Terry O’Malley says that his 3,500-lawyer firm built up its fund formation and patent litigation practices, and jumped at the chance to hire partners with established global practices, such as Chicago-based Latin America cross-border transaction specialist Gianluca Bacchiocchi from Greenberg Traurig. As for the departures, O’Malley says, “We’re not for everybody. Especially for people who want to be in a smaller environment.”

Other firms that typically experience a lot of churn reappeared on our rankings. Greenberg Traurig hired 57 partners and lost 19. K&L Gates had the fourth-highest number of arrivals last year with 42, but netted a loss as it said goodbye to 53 partners. K&L Gates chairman Peter Kalis says most of these departures were lawyers who had joined the firm as a result of several mergers over the last couple of years.

There was also a flurry of activity at Nixon Peabody, but most of it took place at the exits. The firm lost 50 partners, putting it behind Hogan & Hartson and K&L Gates for most departures, and hired nine. Several of the defections were high-profile, such as global finance head Mats Carlston, private equity rainmaker Dominick DeChiara, and insurance chair Michael Murphy ["Growing Pains," September 2010]. Additionally, six Rochester-based partners departed for LeClairRyan after our survey time frame. “The legal market is very fluid. We’ve seen lawyers come and go, and we’ll continue to see that,” says John Snellings, a Nixon partner and member of the firm’s management committee.

Other practice areas were popular. The Dodd-Frank Wall Street reform and financial regulatory bill drove many firms to look for lawyers with expertise in that area. “The Obama administration is keeping lots of lawyers busy . . . due to Dodd-Frank. It’s one of the hottest areas out there. Firms that have never had it want it. Firms that have it are sitting on a gold mine,” says Bingham’s Katz.

Last year’s leader, litigation, decreased slightly as financial constraints curtailed prolonged lawsuits. “Commercial litigation was down due to the fact that a lot of clients are settling rather than going to trial,” says Julie Zammuto, Nixon’s global director of lateral recruiting. Intellectual property was next in line, accounting for 11 percent of 2010′s moves.

Labor and employment attorneys, long considered to be one of the few practice areas immune to the recession, stayed in demand. Jackson Lewis brought on 37 partners last year and opened offices in Baltimore and Milwaukee. Managing partner Patrick Vaccaro says the firm’s strategy has been to swallow small employment boutiques or hire groups of partners from general practice firms. When a group of four DLA Piper partners, headed by Richard Hafets, approached Jackson Lewis about opening a branch office in Baltimore, Vaccaro jumped at the chance. “The DLA Piper partners came from a firm where their rates were way above the norm, and the firm didn’t let them be very flexible. Here, they’ve grown their practice and attracted clients they couldn’t at DLA,” says Vaccaro. He adds that Jackson Lewis partners typically bill $350–$500 an hour, while Hafets’s rate at DLA Piper was approximately $600 an hour. DLA’s O’Malley declined to comment specifically on Hafets or the other partners who left his firm, only saying that “people have lots of reasons for leaving law firms.”

Merger mania also led to many lateral moves. Fifty-four partners flew the coop at Hogan & Hartson (which finalized its merger with U.K.–based Lovells in May), while Sonnenschein Nath & Rosenthal (which finalized its merger with U.K.–based firm Denton Wilde Sapte in September) shed 36 partners. Warren Gorrell, co–CEO of Hogan Lovells, says that some departures were inevitable. “There were some situations where partners who played a very significant role at Hogan & Hartson realized that their role wouldn’t be as significant in the new firm—kind of going from being a big fish in a small pond to a small fish in a big pond.”

The casualties included 18 Hogan partners in the Berlin office who formed their own firm, Raue, as well as lawyers in cities where both Hogan and Lovells had offices, such as Warsaw and Geneva, which became the branch offices for K&L Gates and Akin Gump Strauss Hauer & Feld, respectively. “They were welcome to stay,” adds Gorrell.

There were other factors behind the drop in hiring. Almost every hiring partner we spoke to expressed a reluctance to hire laterals who weren’t on the job market voluntarily. Gorrell says that his firm tries to target partners it thinks would succeed at Hogan rather than partners who are actively looking for new jobs. “We are more skeptical of those people than in the past because we know that firms are managing their performance,” says Gorrell. Guy Halgren of Sheppard Mullin Richter & Hampton was even more direct. “When it appears a partner has been asked to leave, or their reasons for leaving don’t add up, I steer clear of them,” says Halgren, whose firm hired 21 partners this year and lost six. “We only want to hire partners that have been successful in their business.”

Then again, partners have also been hesitant to jump, and the ones who decide to leap want to have as much information as possible. “For years and years, I was astonished that very successful and smart partners would just assume that a firm was successful without wanting to look at the books, the partnership agreement, and the capital requirements,” says legal recruiter Jon Lindsey of Major, Lindsey & Africa.

After one of the slowest markets in recent memory, hiring partners and recruiters are optimistic that things will pick up in 2011. Since the hiring season is typically busiest early in the year, we should find out fairly soon whether they’re right or whether caution will continue to reign supreme.

E-mail: vli@alm.com.